a2MC has appointed Goldman Sachs New Zealand to act as sole arranger, book runner and underwriter for the placement. The placement price will be determined by a bookbuild which has been fully underwritten at a floor price of NZ$0.67 a new share.
It is intended that the placement shares will be offered to institutional investors in New Zealand, Australia and other selected international jurisdictions.
Share Purchase Plan
The Placement will be followed by a share purchase plan (SPP) offer to eligible shareholders in New Zealand and Australia of up to NZ$15,000 a shareholder to raise up to NZ$3 million. Accordingly, individual subscriptions will be subject to pro-rata scale back if total demand exceeds NZ$3 million. The SPP is not underwritten. The price payable for shares under the SPP will be the same as the price paid by investors participating in the placement.
The record date to determine New Zealand and Australian holders' eligibility to participate in the share purchase plan is 7pm (NZ time) on October 7, 2015. The offer document for the SPP will be distributed and the offer is expected to open, on or about, November 3, 2015. The SPP will be open for not less than 12 business days and is expected to close at 7pm (NZ time) on November 19, 2015.
The SPP will be offered to shareholders with a New Zealand or Australian registered address as at the record date for the SPP.
Purpose of the equity raising
The new capital raised will be used to support a2MC’s continued growth in Australia and New Zealand (ANZ) and its targeted international markets of China, the UK and the USA. a2MC’s current capital structure policy is to ensure the business is conservatively funded to execute on its existing growth strategy.
The new capital raised will be applied primarily to fund increasing working capital associated with the significant growth in infant formula in ANZ and China. In order to provide additional working capital flexibility, the company also recently increased its debtor finance facility from AU$3 million to AU$10 million and is negotiating a further bank guarantee facility of NZ$10 million.
In addition to raising capital a2MC is seeking to use the placement to strengthen and broaden its institutional share register.
Trading performance
The company provided a trading update on July 20, 2015 in relation to the performance of the business to that date and the outlook for the year ending June 30, 2016. This update was confirmed and further expanded upon in the 2015 annual report, which was released to the market on September 29, 2015.
a2MC’s growth initiatives are progressing encouragingly and the board remains comfortable that the company’s most recent earnings guidance and outlook commentary contained in the 2015 annual report are achievable and appropriate. The business plan focuses on growing and broadening the ANZ business and developing selected international expansion opportunities with a current focus on markets in China, the UK and the USA.
The performance of the ANZ and China and other Asia businesses during the first two months of FY16 was ahead of budget and the most recent guidance and outlook commentary. As recently advised, infant formula is emerging as a more significant and meaningful growth driver for the company than expected, with a current focus on sales in ANZ and in China. a2MC is experiencing significant growth in sales of infant formula into the ANZ market as well as direct and indirect sales into China. In addition to the growth in infant formula, the prospects for growth of a2 Milk™ branded whole milk powder are also encouraging. This performance is pleasing from a financial perspective, and also reflects the broadening distribution of the a2 Platinum® brand within the ANZ and China markets.
The UK and USA businesses, combined with corporate, performed consistent with earnings expectations for the first two months of FY16. Forecast revenue growth for the UK and USA businesses assumes growth in distribution and sales velocity for key products, primarily in the second half of FY16.
Commenting on the equity raising, managing director and chief executive, Geoffrey Babidge, said:
“The equity raising is expected to raise our capital markets profile and enhance opportunities for investor participation whilst maintaining a conservative capital structure. Together these factors are expected to provide financial flexibility to allow a2MC to execute on growth opportunities that are consistent with the company’s stated strategy and business plan.”
Institutional placement
Key details of the Placement are:
– Fully-underwritten NZ$40 million placement of new fully paid ordinary shares to eligible investors in Australia, New Zealand and other international markets.
– Price to be determined by a bookbuild which has been underwritten at a floor price of NZ$0.67 a share.
– All placement shares to be issued under the placement will rank equally with existing a2MC fully paid ordinary shares currently on issue.
– Allotment of the placement shares expected to occur on October 15, 2015.
– The placement is not being made to a class of shareholders.
– Shareholder approval will not be required for the issue of placement shares under the placement.
Indicative timetable
Trading halts on NZX and ASX commence: Thursday 8th October, 2015 (pre-market open)
Institutional bookbuild: Thursday 8th October, 2015
Trading halts lifted: Friday 9th October, 2015 (pre-market open, unless announced earlier by the Company)
Settlement of Placement Shares to be traded on ASX: Wednesday 14th October
Allotment and commencement of trading of Placement Shares to be traded on ASX: Thursday 15th October
Allotment, settlement and commencement of trading of Placement Shares to be traded on NZX: Thursday 15th October
Dispatch of SPP documentation to shareholders with a New Zealand or Australian registered address: Tuesday 3rd November
SPP offer open date: Tuesday 3rd November
SPP offer closing date: Thursday 19th November
SPP allotment date: Thursday 26th November
The above timetable is indicative and subject to change. All times represent New Zealand time.
